Net Realizable Value (NRV)

What it is:

The net realizable value (NRV) of an asset is the money a seller expects to receive for the sale of an asset after deducting the costs of selling or disposing of the asset.

How it works (Example):

Let's assume Company XYZ needs to get rid of a widget maker. It expects to sell the asset for $10,000. It must pay a broker $600 for help in the sale, $50 in legal paperwork costs and $200 to deliver the asset to the buyer. Thus, Company XYZ's net realizable value on the asset is:

$10,000 - $600 - $50 - $200 = $9,150

Analysts sometimes incorporate the future cash inflows associated with the assets and calculate the present value of the cash inflows and outflows in order to determine NRV.

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